All eyes on Tesla's earnings

By Dana Hull, San Jose Mercury News

Wednesday, February 20, 2013

Electric car enthusiasts as well as skeptics will be watching Tesla Motors (TSLA) on Wednesday as the Palo Alto-based automaker holds its quarterly earnings call, the first since its high-profile feud with The New York Times over an unflattering review of a Model S road trip.

The main thing they’ll be looking for is how many Model S vehicles were delivered to customers in the fourth quarter, whether or not the company has succeeded in ramping up production of the new luxury sedan and the pace of new reservations for the car.

In November, Tesla said it was on track to deliver 2,500 to 3,000 units of the all-electric Model S sedan in the fourth quarter after delivering just 250 cars in the third quarter.

Many analysts, including Ben Kallo, a senior research analyst at Robert W. Baird, expect Tesla to reach its target.

“We have them coming in at 3,013 cars for the year,” Kallo said.

Tesla has promised to reach a 400-car-per-week rate this year at its Fremont factory, which would allow the company to produce 20,000 vehicles a year. And as Tesla ramps up production, many hope to see costs, including sizable research and development costs, coming down.

CEO Elon Musk, along with CFO Deepak Ahuja, always participates in the quarterly conference call that follows the earnings release. Musk typically fields many of the questions.

Kallo said he wants to know how many new customers have put down $5,000 to reserve a Model S and how many of those reservations have been canceled. He wonders if some potential Model S buyers were spooked earlier this month when New York Times reporter John Broder wrote a story about his botched East Coast road trip in a Model S that resulted in the vehicle being rescued by a tow truck. Musk responded with a blistering blog post that defended the car and attacked Broder for what Musk claimed was deliberately setting out to write a negative review.

Tesla does not typically break out reservations by region, but the largest market for the Model S outside of the United States is Europe. There is strong demand from Norway and Denmark, where electric vehicles are excluded from high import taxes. And as Tesla rolls out more stores -- it plans to open a showroom in Beijing this spring -- that should drive ever-higher numbers of reservations.

“Nothing should matter more than the pace of net reservations,” said Aaron Chew of the Maxim Group. “They exited the third quarter with 13,000 reservations. In my view, they need at least 2,500 new reservations for the quarter.”

Andrea James, an analyst with Dougherty & Co., is also focused on reservations. As the company moves through the reservation list and fulfills orders for early adopters, the question for Tesla becomes its ability to breakthrough to mainstream consumers.

“I’d like to see that they are sold out,” said James. “That will help prove that demand is there to people who are still not believers. This is the year where Tesla is going to prove whether or not its model works.”

Tesla’s stock rose more than 6 percent Tuesday, to close at $39.29, after Margaret Sullivan, The New York Times public editor, took reporter John Broder to task for errors in judgment and “taking what seem to be casual and imprecise notes along the journey.” Others, including CNN, CNBC and a group of devoted Model S owners have recreated Broder’s rode trip with no problems.

Tesla published a new blog post from Musk on Tuesday that thanked Sullivan for looking into the matter and thanked customers who “rallied immediately to the defense of Tesla and the electric car revolution.”

“The bottom line is that the Model S combined with Supercharging works well for a long road trip, even in a cold, snowy winter,” wrote Musk in the blog post. “Nonetheless, we will keep increasing the number of Superchargers, improving the software in the car (via over the air updates), and the technology behind the Supercharger itself.”

Tesla reports earnings at 2:30 Wednesday, after the close of the stock market.